OIL : OPEC World Outlook

(Tue, 6 Oct 2020). WTI crude oil prices soared 6.32% on Monday, the best performance over the course of 24 hours since the middle of May. Rising expectations of US fiscal stimulus likely boosted overall market sentiment, offering support to the growth-linked commodity. This also follows what has been dismal performance from crude oil since late August amid rising woes about the outlook for energy demand.

On the chart below, a 14-day moving average of US oil demand and supply can be seen trending cautiously lower since late July. Together, these are fundamental forces that can provide a fairly neutral price setting. The country is the single-largest consumer and producer of the commodity, according to the EIA. Thus, the outlook for general growth and oil output there can greatly influence the price of crude oil.

What about globally? The EIA has also highlighted an ongoing supply-demand deficit through the fourth quarter. That could keep prices fairly stable. For a deeper analysis, check out the latest DailyFX Q4 forecast below. In the near term, in addition to US fiscal stimulus bets, all eyes this week turn to the latest OPEC annual World Oil Outlook on Thursday.

US CRUDE OIL SUPPLY AND DEMAND TRENDS

The report will touch on supply and demand projections out to 2045. Following massive cuts to production to stem a supply glut following the outbreak of the coronavirus, OPEC has been slowly unwinding those reductions. However, the pace has slowed. Last month, the oil-producing cartel averaged about 24.43 million barrels per day, up from 24.39 in August.

If production levels hold around these levels for now, investors may focus be on the demand side of the report. On this front, members may highlight what is expected to be a swift recovery in 2021 which may improve the outlook for consumption. That could in turn boost crude oil prices. However, down the road, that may fuel an increase in US shale output, bringing back supply.

CRUDE OIL TECHNICAL ANALYSIS

While WTI crude oil prices have climbed on Monday, prices stopped short of the falling trend line from late August. In fact, the commodity may continue to trade under a Symmetrical Triangle highlighted below. The downside breakout last week could signal a bearish trajectory. Yet, key support held between 36.15 and 37.10. A close under this range exposes the 34.63 inflection point.

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